Lim vs. Philippine Fishing Gear Industries Inc.

[GR 136448, 3 November 1999]

FACTS: Lim Tong Lim requested Peter Yao and Antonio Chuato engage in commercial fishing with him.
The three agreed to purchase two fishing boats but since they do not have the money they borrowed from
one Jesus Lim the brother of Lim Tong Lim. Subsequently, they again borrowed money for the purchase of
fishing nets and other fishing equipments. Yao and Chua represented themselves as acting in behalf of
“Ocean Quest Fishing Corporation” (OQFC) and they contracted with Philippine Fishing Gear Industries
(PFGI) for the purchase of fishing nets amounting to more than P500k. However, they were unable to pay
PFGI and hence were sued in their own names as Ocean Quest Fishing Corporation is a non-existent
corporation. Chua admitted his liability while Lim Tong Lim refused such liability alleging that Chua and Yao
acted without his knowledge and consent in representing themselves as a corporation.

ISSUE: Whether Lim Tong Lim is liable as a partner

HELD: Yes. It is apparent from the factual milieu that the three decided to engage in a fishing business.
Moreover, their Compromise Agreement had revealed their intention to pay the loan with the proceeds of
the sale and to divide equally among them the excess or loss. The boats and equipment used for their
business entails their common fund. The contribution to such fund need not be cash or fixed assets; it could
be an intangible like credit or industry. That the parties agreed that any loss or profit from the sale and
operation of the boats would be divided equally among them also shows that they had indeed formed a
partnership. The principle of corporation by estoppel cannot apply in the case as Lim Tong Lim also
benefited from the use of the nets in the boat, which was an asset of the partnership. Under the law on
estoppel, those acting in behalf of a corporation and those benefited by it, knowing it to be without valid
existence are held liable as general partners. Hence, the question as to whether such was legally formed
for unknown reasons is immaterial to the case.